Europe News

Dutch PM Calls For Europe Budget Tsar

Peter Spiegel HKSCKPVIamp; Matt Steinglass, Financial Times

The European Union should appoint a new budget tsar with powers to dictate taxes and spending in euro zone countries and who could ultimately adjudicate whether countries should be kicked out of the euro, the Dutch prime minister has argued.

Writing in the Financial Times, Mark Rutte and his government’s finance minister, Jan Kees de Jager, said the new “commissioner for budgetary discipline” should be given the authority to impose a gradually more painful series of penalties on profligate eurozone countries, including the withholding of EU development funds.

But if a country continues to flout EU demands for spending restraint, Mr Rutte’s plan would force euro zone countries to submit their budgets to the commissioner, who could veto it before it is presented to parliament. Over the long term, Mr Rutte said, the euro zone should force countries to leave the euro if it did not abide by the commissioner’s ruling.

“Countries that do not want to submit to this regime can choose to leave the euro zone,” Mr Rutte and Mr de Jager write. “In the future, the ultimate sanction can be to force countries to leave the euro.”

Mr Rutte’s minority government is facing an increasing anti-bail-out backlash at home and his hardline rhetoric may be intended to shore up his position domestically. His cabinet governs with support from the far-right Party for Freedom of Geert Wilders, which opposes all aid to Greece and terms it “throwing money over the dikes”.

However, senior European officials say the Netherlands has become one of the most demanding countries in the negotiations over how to resuscitate the faltering bail-outs of Greece, meaning domestic Dutch politics have a big influence over euro zone debates.

On Wednesday, Evangelos Venezelos, the Greek finance minister, announced a 20 percent cut in government employees to meet international demands for a tougher austerity program.

International lenders had quit Athens last week following disagreements over whether Greece was implementing the measures demanded by the EU and IMF. At risk was an 8 billion euros aid payment needed by the end of the month.

European stock markets rallied with Germany’s Dax up 4 percent and the CAC-40 in Paris 3.6 percent higher. But Greek bonds continued to sell off with benchmark 10-year yields rising above 20 percent for the first time in the euro era while a 3-year bond maturing in March yielded as much as 128 percent.

Investors were also buoyed by a German constitutional court ruling signing off on euro zone bail-outs. German critics had sued to stop the rescues of Greece, Ireland and Portugal, arguing they violated German laws giving the Bundestag authority over all budget matters.

Mr Rutte’s proposal is one of the first salvos in what is expected to be an intense two-month debate over whether the euro zone needs to centralise economic policymaking in order to survive the ongoing debt crisis.

Last month, euro zone leaders tasked Herman Van Rompuy, the European Council president, with formulating a new set of measures to bring closer fiscal union in the single currency. Mr Van Rompuy has until next month to draw up his proposals.